The second year of a legislative session starts quickly


The second year of a legislative session starts quickly. The so-called "House of Origin" deadline requires that any legislation introduced during the first year of the two-year session clear its house of origin by the last day in January of the second year. For our purposes, that means that Assembly bills introduced during 2005 must have reached the Senate by the end of January and similar Senate bills had to pass to the Assembly or, by rule, those measures would die.

SB 540 (Kehoe) was the only legislation that moved last month of interest to apartment owners. As originally drafted last year, the bill would have prohibited a landlord from banning the display of noncommercial signs, posters, flags, or banners subject to some size, quantity and materials limitations. After meeting with representatives from apartment and realtor interests - and learning of the significant substantive issues the bill presented - Senator Kehoe agreed to postpone consideration of the measure during 2005.

Kehoe returned this year with a more focused proposal. As amended on January 23rd of this year, the bill would allow tenants to display campaign signs relating to an election or legislative vote from 90 days prior until 15 days following the relevant election or vote. The legislation would restrict tenants to signs no more than nine square feet in size. By narrowing the bill to political signs only and limiting both the size and the duration of the posting the bill now would place a much less onerous burden on apartment owners.

Despite the improvements in the bill the Apartment Association, California Southern Cities along with the California Association of Realtors and other organizations representing apartment owners opposed the bill when the Senate Judiciary Committee considered the measure during its January 17th hearing. (One note on timing. Although the bill wasn't formally amended until one week after the committee hearing Senator Kehoe had apprised interested parties of her intended amendments several days before the hearing. Despite the dates appearing not to correspond, the debate during the January 17th hearing concerned the January 23rd version of the bill.) The opposition made three primary arguments: (1) the bill could conflict with various local ordinances as well as private community agreements; (2) the bill placed no limit on the number of signs a tenant could display; and (3) the bill did not provide for reasonable restrictions on the method of display.

SB 540 passed out of the Senate along an essentially party line vote. The Judiciary Committee approved the bill by a 4-1 vote (four of the five Democrats voting "AYE" with the fifth not present while one Republican voted "NO" with the second on the committee not present). The full Senate passed the bill by a 25-12 vote. On the Senate floor twenty-three of the twenty-five Democrats cast AYE votes with the remaining two absent. Of the fourteen Republicans, twelve voted NO but two did vote AYE. The Senate currently has one vacancy. The measure now moves to the Assembly where it will next be heard in the Assembly Judiciary Committee likely this May. Senator Kehoe expressed an interest after the Senate committee hearing in attempting to work out a compromise. Meetings to that end likely will occur during the next several months.

The debate on SB 540 has been somewhat off point. Supporters cast the bill as an enhancement of free speech rights. That is a legally incorrect argument. While both the United States and the California constitutions provide a right for free speech that right protects against government regulation of speech and not restrictions that landowners place on private property. The federal right is enforceable only against so-called "state actors." The California right to free speech, which can be found in Article 1, Section II of the state constitution, provides a broader speech protection than the federal constitution. In interpreting this section, California courts have ruled that the state right to free speech protects against privately-placed restrictions when the property regulated is "freely and openly accessible to the public." State courts have struck down speech restrictions in privately-owned shopping malls, holding that the public character of the property makes it akin to the public square. California courts, however, have declined specifically in the Golden Gateway case to extend free-speech protections to privately-owned apartment complexes. Under current law, California tenants do not enjoy a constitutional right to free speech in the rental complex. The scope of speech rights and the public status of apartment complexes turn on court interpretations of the state constitution that this legislation could not affect. SB 540 poses the related but distinct policy question of whether the Legislature should extend statutory protections for speech.


February 24th marks the deadline for new legislation to be introduced for consideration this year. Predictions as to 2006 legislation that will affect property owners are premature at this point but odds are that a new version of last year's SB 51 (Kuehl) will be seen in 2006. That legislation, stopped on the Assembly Floor during the final week of session last September, would have continued the requirement that landlords give a 60-day notice of termination on a periodic tenancy when tenants have resided at the dwelling for one year or more. New legislation regulating recycling at apartment complexes is supposedly in the works as well. A future edition of this report will detail all the bill introductions of interest to association members.
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New Tenant Screening Services


I am pleased to announce the new tenant screening platform is up and running! We have been telling you that a change was coming and it is here.

Our new provider The Screening Pros' has developed a system whereby previous addresses of prospective tenants are pulled from credit lines and then checked for evictions. On the first day of trials we found several evictions based on this system, a more thorough search for you!


Looking Back over the past 12 months


The arrival of a new legislative year prompts a look back at the political events of the past 12 months. Apartment owners had a good 2005 in Sacramento; no bills that the Apartment Association California Southern Cities opposed became law, several legislative compromises were achieved to clarify and improve the laws affecting property management, and the defeat of SB 51 (Kuehl) led to the expiration on January 1, 2006 of the 60-day notice requirement for tenants of more than one-year occupancy with the law now reverted back to the long-standing policy of 30-days notice. Broader political trends suggest that significant new challenges will emerge during 2006.

Any discussion of California politics should begin with an evaluation of Arnold Schwarzenegger. His 2005 did not turn out as well as he had planned. Remember that just 12 months ago the Governor reigned supreme in Sacramento. He commanded broad political support with his approval ratings exceeding sixty percent -- double the level of support that registered for the state legislature. And that support had already translated into significant political accomplishments. Schwarzenegger’s debt consolidation bond had won approval on the March 2004 ballot. Voters had similarly in the November 2004 elections backed the Governor’s calls to limit business practice lawsuits, retain the 3-Strikes Law in place, and repeal the mandate on employers to provide health insurance. The workers’ compensation reforms that he had propelled through the legislature were already producing a tangible drop in insurance premiums. Just over one year into office, Schwarzenegger had silenced the political commentators who during the Davis and later years of the Wilson Administrations had argued that California was too complex and disparate to govern.

When Schwarzenegger delivered his 2005 “State of the State” address from the Assembly Chamber last January, by all appearances he possessed the political capital to back his demands for new and further political change. He challenged legislative leaders to reform legislative redistricting, restructure the public employee pension system, alter the funding schedule for public schools, and add spending restraints to the budget process. The Governor made it clear that if legislators did not cooperate on these issues he would take his agenda to the people in a special election. At first the speech delivered its intended effect; the Schwarzenegger agenda dominated the legislative discussion. But for the first time in his tenure the Governor did not carry the day.

Undetected by most observers – including the Governor’s political advisors – some cracks had appeared in the Schwarzenegger political façade. It was true, as referenced above, that the voters in the 2004 primary and general elections had sided with the Governor in the initiative battles. But that same electorate had denied him any political coattails; Schwarzenegger’s campaign to elect more Republican legislators had fallen on deaf ears as Democrats retained all their seats in the state Senate and Assembly. Republicans shrugged off their failure to gain seats as a byproduct of California’s dissatisfaction with President Bush, who led the ticket that all the Republican candidates had run on. Democrats nonetheless felt emboldened by their electoral successes. Silent during 2004 when first confronted by Schwarzenegger, the Democratic legislative leadership interpreted the election results to mean that they could survive Schwarzenegger and – more important – sustain a broad opposition to his proposals. They decided to fight.

Democrats enjoyed two advantages in their legislative battles with the Governor. Some technical blunders in the drafting process required that the Governor withdraw his proposed pension-reform initiative. At the same time, Democratic constituencies – the California Labor Federation, AFL-CIO, the California Nurses Association, and the California Teachers Association chief among them – mounted a political attack in the media against the Governor. During 2005 any Californian with normal television viewing habits saw tens and perhaps even hundreds of TV spots criticizing Schwarzenegger. The opposition, which had become alienated from the administration during 2004, lent ballast to the Democrats’ stance in the legislature. During the first quarter of 2005 the legislature rejected each of the Governor’s four reforms, leaving Schwarzenegger to confront his own promise that he would take these issues to the people if the Assembly and Senate failed to act.
Hindsight is 20/20, but in retrospect it appears obvious that Schwarzenegger never had a chance. The particulars are well known; the Governor followed through on his threat first delivered last January and called a special election to consider his reform proposals. At the ballot box the voters delivered a quite stinging – and for Schwarzenegger his first – political defeat. Exit polls indicated that voters objected as much if not more to the process of a special election as they did to the particular content of the proposals offered. For apartment owners the political events of 2005 amounted to political theatre; as citizens you had an interest in the initiatives being decided but the results did not exert a direct effect on your businesses. That could change.

The threshold question regarding the 2006 session of the California Legislature concerns “what’s next?” Will the Democrats and their allies continue to focus their energies on attacking Schwarzenegger with an eye toward driving him from office come November? Or, with the balance of power in Sacramento now weighted more in their direction, will Democrats attempt to engage Schwarzenegger on a reform agenda more to their liking? The posture Democrats take will, as much as anything, shape the general debate on issues – including apartment issues – during 2006. An escalation in partisanship could require business friendly Democrats to follow their leadership and vote a more liberal line. That would upset the coalition of moderate Democrats and Republicans that delivered the winning votes on apartment issues this year. Events during the next few months will likely answer this question.

Schwarzenegger too remains a work in progress; what lessons will he draw from his 2005 experiences? The eclectic nature of his operation – a democrat now serving as his chief of staff, an increasingly influential First Lady, a new team of Republican political consultants coming on board – suggests that he will be getting different and differing feedback this year. The smart money says that the Governor will look for a return to the bi-partisan characteristics of his earliest days in office. That’s what has worked for him and politicians – particularly during election years – seek the comfort of past successes. He’s never been a rock-solid pro-business governor in the mold of George Deukmejian but his life experiences have given him a core sense that the best economic policy is to foster a favorable business climate. By and large he is and will remain sympathetic to the business interests of apartment owners.

During this coming year the apartment owners lobby should seek to protect its moderate votes. That means not simply applying the usual tools of politics – campaign and media support for allies – but also working issues generically. Our efforts will begin with the goal of keeping apartment issues out of the broader political maelstrom. If partisanship returns to a boil the Democrat leadership likely would begin to look for issues that could be used to drive a wedge between the governor and his business supporters. Staying off that list means staying out of that fight.
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New Screening Services


In an ever vigilant campaign to bring you, our members, the most effective member services, the Apartment Association, California Southern Cities will launch an added credit screening opportunity in April.

In addition to the auto-select credit check program, we will introduce SCOREX, a risk management program with 42 million records nationwide. Basically, this system can access any eviction that any landlord has filed.


Political Reforms, Special Elections and Constitutional Rights


Although the legislature is not in session in Sacramento, political initiatives are being planned, election campaigns are already underway and the impact of the failed special election in November is still being analyzed.

The political landscape has shifted somewhat in Sacramento. Some democrats and union leaders believe they are controlling the direction of the state while the Senate President Don Perata (D) and Assembly Speaker Fabian Nunez (D) seem to be trying to work with the Governor on planning a modified reform platform for the state.

Did the “clean sweep” against the ballot initiatives mortally wound the Governor or just give him a temporary black eye? Only the next nine months will tell for sure despite the negativity of the political pundits and pollsters. But, the question remains: what went wrong for the vastly popular Governor elected on a government reform program when he tried to implement the reforms people wanted?

Some mistakes were made early on in the process that made the election more difficult. According to State Senator John Campbell (Republican), the budget initiative (Prop 76) was not what it should have been and had drafting issues. The attacks on the “three judge panel” that helped kill the redistricting initiative (Prop 77) could have been avoided with a larger panel and more controls. Because the reform package was put together with great haste, it was not as comprehensive nor as appealing as it could have been.

Note that all eight initiatives failed. Two of these were initiatives that were promoted by liberal interests: Prop 79 to socialize prescription drugs and Prop 80 to re-regulate the electricity market. Those two actually lost by the greatest margin! So, this was not a repudiation of just conservative proposals. It was a rejection of all proposals. It appears that supporters of reform were carefully voting for some initiatives and against others. But those opposed were voting “no” on everything. The “no” side was able to communicate and deliver voters with a simple vote “no” on all reforms message. It worked.

Approximately $250 million was spent to urge a “no” vote on all the initiatives. Conversely, there was only about $50 million spent on the “yes” side. It is hard to win an election when you are outspent 5 to 1. Most of that money was from unions against the Governor. And, because Prop 75 failed, they will be able to raise their dues and do it again in 2006.

Some argue that the failure of these issues was a protest against the initiative process overall—Californians are tired of signature gathering governance.

Yet, as of November 16th, there were 27 NEW initiatives in circulation and another 22 in the Attorney General’s office awaiting title and summary! Some initiative are statutes, some are constitutional amendments. The topics range from border police to elimination of domestic partnerships to tax increases for preschools. Even dog breeding, casino-style gaming and alcohol surtax make the list.

It doesn’t appear that Californians are opposed to initiatives.

Possibly, Californians are opposed to special elections.

Current law permits the governor to call a special election for a recall; to replace a vacancy in the Legislature or Congress or when an initiative qualifies for the ballot.

Assembly Majority Leader Dario Frommer will introduce a constitutional amendment that would restrict the governor’s power to call a special election when an initiative qualifies.

Under this proposal, the governor could only call a special election after declaring a state of emergency and only ballot measures dealing with that emergency (passed by a vote of the Legislature) could appear on the ballot. All other qualifying initiatives would have to wait for the next regularly scheduled statewide election. This proposal would also allow statewide bonds (passed by the Legislature) to go on the special election ballot.

According to Frommer, since 1911, only 14 special elections have been called in California, with five taking place over the last 35 years.

As we contemplate the ramifications of reforms and special elections, the State should not pass a measure that will hog tie any governor in the future and prohibit the successful implementation of the initiative process. The initiative process was developed for the people—let’s not throw the proverbial baby out with the bathwater.
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